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Question(s) / Instruction(s):

58. For the basic accounting equation to stay in balance, each transaction recorded must a. affect two or less accounts. b. affect two or more accounts. c. always affect exactly two accounts. d. affect the same number of asset and liability accounts.

59. Which of the following statements is true? a. Debits increase assets and increase liabilities. b. Credits decrease assets and decrease liabilities. c. Credits decrease assets and increase liabilities. d. Debits increase liabilities and increase assets.

60. Assets normally show a. credit balances. b. debit balances. c. debit and credit balances. d. debit or credit balances.

61. An awareness of the normal balances of accounts would help you spot which of the following as an error in recording? a. A debit balance in the drawing account b. A credit balance in an expense account c. A credit balance in a liabilities account d. A credit balance in a revenue account

62. If a company has overdrawn its bank balance, then a. its cash account will show a debit balance. b. its cash account will show a credit balance. c. the cash account debits will exceed the cash account credits. d. it cannot be detected by observing the balance of the cash account.

53. Which account below is not a subdivision of owner's equity? a. Drawing b. Revenues c. Expenses d. Liabilities

64. When an owner makes a withdrawal a. it doesn't have to be cash, it could be another asset. b. the drawing account will be increased with a credit. c. the capital account will be directly increased with a debit. d. the drawing account will be decreased with a debit.

65. The drawing account a. appears on the income statement along with the expenses of the business. b. must show transactions every accounting period. c. is increased with debits and decreased with credits. d. is not a proper subdivision of owner's equity.

66. Which of the following statements is not true? a. Expenses increase owner's equity. b. Expenses have normal debit balances. c. Expenses decrease owner's equity. d. Expenses are a negative factor in the computation of net income.

67. A credit to a liability account a. indicates an increase in the amount owed to creditors. b. indicates a decrease in the amount owed to creditors. c. is an error. d. must be accompanied by a debit to an asset account.

68. In the first month of operations, the total of the debit entries to the cash account amounted to $800 and the total of the credit entries to the cash account amounted to $800. The cash account has a(n) a. $600 credit balance. b. $800 debit balance. c. $200 debit balance. d. $200 credit balance.

69. The usual sequence of steps in the transaction recording process is: a. journal  analyze  ledger. b. analyze  journal  ledger. c. journal  ledger  analyze. d. ledger  journal  analyze.

70. In recording business transactions, evidence that an accounting transaction has taken place is obtained from a. business documents. b. the Internal Revenue Service. c. the public relations department. d. the SEC.

71. After a business transaction has been analyzed and entered in the book of original entry, the next step in the recording process is to transfer the information to a. the company's bank. b. owner's equity. c. ledger accounts. d. financial statements.

72. The first step in the recording process is to a. prepare financial statements. b. analyze each transaction for its effect on the accounts. c. post to a journal. d. prepare a trial balance.

73. Evidence that would not help with determining the effects of a transaction on the accounts would be a. a cash register sales tape. b. a bill. c. an advertising brochure. d. a check.

74. After transaction information has been recorded in the journal, it is transferred to the a. trial balance. b. income statement. c. book of original entry. d. ledger.

75. The usual sequence of steps in the recording process is to analyze each transaction, enter the transaction in the a. journal, and transfer the information to the ledger accounts. b. ledger, and transfer the information to the journal. c. book of accounts, and transfer the information to the journal. d. book of original entry, and transfer the information to the journal.

76. The final step in the recording process is to transfer the journal information to the a. trial balance. b. financial statements. c. ledger. d. file cabinets.

77. The recording process occurs a. once a year. b. once a month. c. repeatedly during the accounting period. d. infrequently in a manual accounting system.

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